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Food Stocks to Watch for Earnings on Nov 7: SYY, LNCE, DF

The bulk of the Q3 earnings season is now behind us with results already out for 364 S&P 500 members. The results announced so far display improvement compared with the preceding quarters although revenue beats seems hard to come now. However, the quarter is on track to report notable growth after five quarters of back-to-back decline. According to the latest Earnings Outlook, of the 72.6% S&P 500 members that have reported Q3 results so far, 72.3% have posted positive earnings surprises and 54.7% have come ahead of top-line expectations.

The Consumer Staples sector is showing positive signs with total earnings expected to grow 6.1%, while revenue is anticipated to inch up 1.1%. As of Nov 2, 68.8% of the total number of S&P 500 companies in this sector has reported their results, wherein 81.8% beat earnings and 40.9% of companies’ surpassed revenue estimates. Efficient pricing, solid cost reduction initiatives, lucrative acquisitions and efforts to enhance product portfolio cushion these companies from macroeconomic hurdles, consequently driving their bottom lines.

The food sector is part of the consumer staples sector and has so far reported decent earnings this season. Food stocks are particularly doing well in the third quarter. Leading firms from the industry like The Hershey’s Company (HSY) , Pinnacle Foods, Inc. (PF - Free Report) , B&G Foods, Inc. (BGS - Free Report) , Mondelez International, Inc. (MDLZ - Free Report) , Kellogg Co. (K - Free Report) and many others have delivered better-than-expected Q3 earnings results despite currency headwinds and the sluggishness in emerging markets. Domestic business of these food companies has particularly fared well aided by an improving economic and consumer spending environment.

Let’s take a look at what’s in store for three major food stocks which are scheduled to release their quarterly numbers on Nov 7.

We need to have a positive Earnings ESP and a Zacks Rank #1, #2 or #3 (Hold) to be confident about a positive surprise. The Zacks Consensus Estimate for first-quarter earnings is pegged at 59 cents. Last quarter, this global food products maker and distributor posted a positive earnings surprise of 6.7%. In the trailing four quarters, the company reported an average positive surprise of 8.3%.

Sysco has delivered higher gross margins in the past one year, after witnessing a decline in the same since the last two fiscal years. It seems that Sysco’s growth strategy is paying off. Further, its efforts to boost sales and margins are likely to impact results in the to-be-reported quarter. However, Sysco expects food cost deflation and currency translation to unfavorably impact its first-quarter results. The company experienced continued deflation in the past fiscal year in center-of-the-plate protein categories, such as meat and seafood, along with deflation in dairy, which management believes led to soft earnings growth in fiscal 2016. The deflationary trend is likely to pose as a hindrance to sales and gross profit in first-half fiscal 2017. (Read: Will Sysco Q1 Earnings Surprise Despite Headwinds?)

Snyder's-Lance, Inc.(LNCE - Free Report) is slated to release its third quarter fiscal 2016 results before the opening bell. The company is engaged in the manufacture, market and distribution of a variety of branded and private label snack foods as well as bakery products. The company delivered positive earnings surprises in two of the past four quarters and negative surprises in the remaining two, making for an average negative earnings surprise of 3.3%. The Zacks Consensus Estimate for third-quarter earnings is pegged at 30 cents. It has a Zacks Rank #3 and an Earnings ESP of 0.00%, which makes surprise prediction difficult. Please check our Earnings ESP Filterthat enables you to find stocks that are expected to come out with earnings surprises.

Dean Foods Company (DF - Free Report) is set to report third-quarter 2016 results. Last quarter, the company had delivered a negative earnings surprise of 2.6%. However, we are not sure about an earnings beat for this stock in the to-be-reported quarter. Earnings ESP for Dean Foods currently stands at 0.00% and it carries a Zacks Rank #3. The Zacks Consensus Estimate for third-quarter earnings is pegged at 37 cents. In the trailing four quarters, the company outperformed the Zacks Consensus Estimate by an average of 10.4%.

The company had earlier expected volumes to dip in the low-single digits in third-quarter 2016, but an improvement from current trend. Additionally, the company anticipates the average Class I Mover for quarter to come in at $15 per hundred-weight, representing an 11% increase sequentially but an 8% decline year over year. Considering these factors, management had projected third-quarter adjusted earnings in the range of 32–40 cents a shar. However, taking cue from this strength, focus on cost management and constant brand building initiatives, the company remains on track to consolidate its position in the dairy industry and boost shareholder value. That said, we would wait and see what is in store for this dairy products producer in the ensuing quarterly release. (Read: Dean Foods Q3 Earnings: What's in Store This Quarter?)

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